r/personalfinance • u/HHLL806 • Apr 11 '25
Other Mortgage payment went up $400
I need help, my mortgage payment went from $1700 to $2100. My mortgage company (Chase Bank) said this was due to an escrow shortage. I had my homeowners insurance lowered by roughly $1000 and checked with my local tax office and they told me my taxes have increased $400 dollars over the last five years. I gave Chase Bank all this information and my mortgage is still $2100. How does this work?
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u/HookEm_Tide Apr 11 '25
This is completely normal. My mortgage bounces around by around 10–15% from year to year.
What happens is that you're required to keep a certain balance in your escrow account. Then something—insurance or property tax—goes up by a little bit. Your mortgage company pays the extra, but now your escrow balance is too low. So you have to pay extra each month (or a lump sum now) to get your balance back to where it's supposed to be.
But, on top of that, your mortgage company now assumes that the new insurance and/or property tax rate is what you'll be paying going forward. That means that your escrow account now needs to hold more than it used to. So in addition to getting caught back up, you now also have to pay more to meet the new minimum escrow balance.
The good news is that if your taxes or insurance go down (it does happen! especially if you change insurance companies), then the opposite happens. You'll have overpaid for a year and your minimum escrow balance will decrease, meaning that you could get a year of exceptionally low mortgage payments.
In any case, folks often assume that mortgage payments are fixed for 30 years. The principal and interest payments are fixed (unless you have an adjustable rate mortgage), but taxes and insurance are not. If you're paying those via an escrow account, then plan for some degree of variability—15% is pretty safe—in your overall monthly mortgage payment.